Friday, March 30, 2018

By Natalie Kostelni – Reporter, Philadelphia Business Journal
Keystone Property Group is seeking to expand the Airport Business Center, a three-building office complex it owns in Tinicum, Pa.

The developer wants to construct a 428,734-square-foot addition to one of the existing buildings on the property at the intersection of Stevens Drive and Governor Printz Boulevard. The expansion would go on 44.75 acres adjacent to 200 Stevens Drive and next to the existing building. That building is leased to AmeriHealth Caritas, the region’s largest Medicaid managed care organization.

Sources have said the addition would accommodate expansion of the company and enable it to grow to around a total of 700,000 square feet over time. Jawanza Keita, a spokesman for the company, said it doesn’t comment on lease agreements or related matters.

AmeriHealth Caritas already occupies 300,000 square feet at the Airport Business Center. It also occupies another 150,000 square feet at International Plaza, a nearby office complex.

AmeriHealth Caritas is growing. Last October, the Delaware Department of Health indicated that Social Services had awarded one of two Medicaid provider contracts to the Philadelphia-based company. It is owned by Independence Health Group in partnership with Blue Cross Blue Shield of Michigan. The company has more than 5.7 million Medicaid, Medicare and Children’s Health Insurance Program, or CHIP, members in 17 states and the District of Columbia.

GlaxoSmithKline has officially entered into an agreement to sell its West Campus in Upper Merion to O’Neill Properties Group in a deal worth about $50 million.

GSK wouldn’t disclose the sale price, but sources familiar with the transaction indicate the property at 709 Swedeland Road is trading in excess of $50 million. It consists of 43 buildings totaling about 2.2 million square feet of office, lab and warehouse space.

The sale is expected to close early in the second quarter, said Frances DeFranco, a GSK spokeswoman.

The sale means that GSK employees working out of the west campus will be moved to the pharmaceutical company's other local facilities. GSK operates properties in Upper Providence as well as what is referred to as its Upper Merion East Campus, which is next door to the West Campus. The company also has an office at the Philadelphia Navy Yard.

“GSK will continue to occupy the Upper Merion West Campus after the transaction closes, and will be relocating a majority of employees to either Upper Providence or Upper Merion East over the next year,” DeFranco said.

The company will also keep its sterile manufacturing facility on the Upper Merion West Campus to support early phase development and clinical sterile drug product manufacturing, DeFranco said.

GSK has been evaluating and realigning its real estate for the last 10 years. In early 2011, the company announced it would relocate from Franklin Plaza in Philadelphia to the Navy Yard. In 2013, it informed employees that it would rearrange significant portions of its real estate in the western suburbs.

Those efforts would involve consolidating, closing and expanding some facilities over the next several years. Those plans have been or are now being realized. They entailed:

Closing its Upper Merion West Campus and leasing back a portion for its pilot plant;
Not renewing a 200,000-square-foot lease at 2301 Renaissance Blvd. in Upper Merion;
Retaining and keeping operational Upper Merion East, which totals 760,000 square feet at 893 River Road. It also has plans for a 100,363-square-foot expansion to one of its buildings at the River Road plant; and
Investing $245 million at its Upper Providence facilities. It is reconfiguring its research and other spaces in Upper Providence to make them more efficient with an eye toward making it one of two global research centers. The company will conduct research for HIV and infectious diseases, oncology, cardiovascular and other areas from there.

In spite of a nor’easter bearing down on the Philadelphia region last Wednesday, Kimberton Whole Foods went forward with a scheduled opening of a new store in Collegeville, Pa., its first in just over three years.

To the surprise of Terry Brett, who established the grocery chain 32 years ago with his wife, and other employees, shoppers actually showed up and in a good number.

That seemed to be a harbinger for the store at 222 E. Main St. as the following days proved there must be pent-up demand for the organic grocer or at the least, a desire for more shopping options.

Brett had to bring more carts on Friday from his flagship store in Kimberton, Pa., since they were running out at Collegeville. By Saturday, wall-to-wall shoppers were milling through the aisles and lines were deep with shoppers patiently waiting to get checked out.

“Our sales have been way beyond expectations,” Brett said.

The new store, the grocer's sixth, is the result of Kimberton backfilling a portion of a former Acme. Though it had plans to open last fall, the date got pushed into March because of design and construction delays. The store employs 60 full- and part-time workers.

Ron Williams, who has been shopping at the grocery store since it fist opened in Kimberton in 1986, was impressed with the Collegeville location. “It’s very well organized and the layout is a huge plus,” he said.

The store in Collegeville totals 15,000 square feet and Kimberton is 8,000 square feet with aisles so narrow that two modestly-sized shopping carts can’t maneuver through together.

Will Amazon make the difference in bringing jobs to Philadelphia? Gerard “Jerry” Sweeney says maybe — but Philadelphia could create even more jobs just by changing its tax structure and doing more to boost business in the city.

The president and CEO of Brandywine Realty Trust addressed the Greater Philadelphia Chamber of Commerce on Thursday morning to a packed house, and said that whether or not Amazon picks the city for its next headquarters, Philadelphia needs to generate more jobs.

Currently, Philadelphia lags in job growth, at just 1.3 percent annually over the last six years, compared with the national average of 2.1 percent over the same period, he said.

The average job growth rate of the top 25 cities is 2.8 percent annually. “We have an anemic job growth track record,” he said. “Amazon has done a great job disrupting procurement. I love that they broke the bounds of traditional site selection processes. What they wind up doing, who knows? I was delighted we put together a great proposal in Philadelphia. We’ll see what happens.”

Amazon promised to bring 50,000 jobs to the city, which now has 600,000 jobs.

But more important, Sweeney said, “if Philadelphia grew at just the national average growth rate, we could generate 90,000 jobs over 10 years. That’s the important thing. It’s not ‘Amazon, please pick us.’ We’ve got to look inward to drive that growth.”

by Steve Lubetkin, Globest.com
PHILADELPHIA, PA—Bethesda, MD-based RLJ Lodging Trust has sold the 364-room Sheraton Philadelphia Society Hill in Philadelphia, PA for $95.5 million or approximately $262,000 per key to The Buccini/Pollin Group, a Wilmington, DE-based real estate acquisition, development, and management firm. BPG says PM Hotel Group, a hotel management company based in Washington, DC, will manage the hotel.

“The Sheraton Society Hill is a remarkable asset in an unmatched location surrounded by numerous business and leisure demand generators, from the Liberty Bell and Independence Hall to Fortune 500 companies like Comcast and Aramark,” says Dave Pollin, co-founder, BPG. “We are in the advanced planning stages of a complete makeover of the hotel to upgrade the guest experience. In addition to improving both guest rooms and public spaces, we intend to change brand affiliations to better match and serve the surrounding community.”

BPG also owns The Franklin at Independence Park, 401 Chestnut Street, Philadelphia; the Fairfield Inn King of Prussia; and the Crowne Plaza King of Prussia, at 258 and 260 Mall Blvd., King of Prussia, respectively.

The hotel also provides 20,000 square feet of meeting and event space, including the 7,800 square-foot Society Hill Ballroom capable of hosting up to 900 guests.

Buccini/Pollin has developed and acquired hotel, office, residential, retail, and parking properties throughout the United States, valued at more than $4 billion. Investments include more than 40 hotels, six million square feet of office and retail space, 10 major residential communities and multiple entertainment venues, such as Talen Energy Stadium, home of the Philadelphia Union Major League Soccer team.

“The sale of another non-core asset at a highly accretive valuation highlights the meaningful progress we have achieved in realizing the embedded value from the FelCor merger,” says Ross H. Bierkan, president and chief executive officer of RLJ. “Not only is this disposition highly accretive on a valuation basis, but it is also accretive to our portfolio RevPAR and EBITDA margin. With this transaction, we have accomplished our initial goal of generating approximately $300 million from asset sales at an attractive aggregate multiple. We remain laser-focused on unlocking the embedded value within our portfolio through executing on our strategic initiatives. We continue to expect to execute on a second round of asset sales that will generate an additional $200 million to $400 million in proceeds this year.”

The transaction sale price represents a 14.7-times multiple on the hotel’s 2017 EBITDA and approximately a 5.6 percent capitalization rate on the hotel’s 2017 net operating income, which excludes planned capital expenditures. The hotel EBITDA margin for the Sheraton Philadelphia was 28.0 percent in 2017, below the Company’s reported 33.1 percent EBITDA margin for the year. The hotel’s 2017 RevPAR was $119.12 compared with the portfolio average of $135.82.

The Company intends to apply the net proceeds from the sale to pay down its credit facility and for general corporate purposes.

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust that owns 155 hotels with approximately 30,200 rooms in 26 states and the District of Columbia and an ownership interest in one unconsolidated hotel with 171 rooms.www.omegare.com

Pennsylvania Steel, a metal and alloy provider, has renewed its lease for 75,000 square feet in the industrial building at 1139 Lehigh Ave. in Whitehall, PA.

The industrial warehouse totals 508,000 square feet in the Riverside Business Center. The property was developed in 1910, with a renovation completed in 2008. Other tenants include Bell Nursery, Lehigh Fabrication and Power Line Supply, among others.

ACE Insurance Group has renewed its lease for 23,333 square feet in the office building at 3 Country View Rd. in Malvern, PA.

The three-story building totals 70,000 square feet in the Great Valley Corporate Center. Rouse & Associates developed the property in 1998, and it is currently owned by Safanad Limited and Workspace Property Trust.

ACE occupies the entire third floor. Sungard Higher Education also occupies space in the building.

Geisinger Health System sold two of it’s medical facilities in Pennsylvania to Skyline Healthcare for $27 million, or about $241 per square foot.

The deal totals 111,957 square feet and includes the Mountain View Care Center at 2309 Stafford Ave. in Scranton, PA and the Bloomsburg Healthcare Center at 211 E. 1st St. in Bloomsburg, PA.www.omegare.com

Tryko Partners acquired ManorCare Health Services at Mercy Fitzgerald Hospital in Yeadon, PA. Marquis Health Services, the company’s healthcare affiliate and a third-generation nursing home operator, will orchestrate a more than $2.5 million renovation of the property, which has been renamed Providence Rehabilitation and Healthcare Center at Mercy Fitzgerald. Built in 1995, Providence Rehabilitation and Healthcare Center at Mercy Fitzgerald is adjacent to Mercy Fitzgerald Hospital, which is part of the Mercy Health System. The two-story, 129-bed facility provides post-hospital care, short-term rehab and long-term residential care. Tryko/Marquis purchased the facility from a ManorCare Health Services/Mercy Fitzgerald Hospital joint venture. The hospital will retain ownership of the land.www.omegare.com

US Storage Centers has expanded into Pennsylvania with acquisition of a facility in Philadelphia from Philly Self Storage. The facility will be re-branded as a US Storage Centers self storage facility. US Storage Centers acquired the 1,545 unit, 107,606-square-foot self storage facility located at 1910 S. Christopher Columbus Boulevard. It features climate-controlled units, electronic gated access carts and dollies and RV Parking.www.omegare.com

Saturday, March 17, 2018

United Furniture Style, a furniture retailer, has signed a lease for 15,800 square feet in the retail building at 199 Kedron Ave. in Folsom, PA.

The building totals approximately 24,200 square feet in the Delaware County submarket. United Furniture Style’s lease includes most of the building, with Marburn leasing the remaining portion.www.omegare.com

The Cordish Companies acquired the 238-room Holiday Inn at 900 Packer Ave. in Philadelphia, PA from an investment group led by Barry Sussman of Lilly Street Capital and Stadium Hospitality Group LLC for $37 million, or about $155,000 per room.

The 11-story, 159,624-square-foot, 4-Star hospitality building was originally constructed in 1973 on nine acres in the South Philadelphia submarket. It was renovated in 2004, flies the Inter-Continental Hotel Group Flag, and last year averaged 64 percent occupancy.

Cordish Companies plans to redevelop the property into a hotel and casino.www.omegare.com

Blackstone Real Estate Income Trust, Inc. (BREIT) announced it has successfully closed on a $1.8 billion transaction to acquire a 22 million-square-foot portfolio consisting of 146 infill warehouse and distribution properties across the country.

Known as the Canyon Industrial Portfolio, the properties were sold by a pair of funds sponsored by Boston-based Cabot Properties: Cabot Industrial Value Fund IV, L.P. and Cabot Industrial Value Fund IV Manager, LP. Blackstone had previously put the portfolio under contract in late December.

The acquired properties consists of 146 "last-mile" buildings, with the largest concentration in Chicago at 4 million square feet accounting for 18% of the portfolio's aggregate base rent; followed by Dallas (3.22 million SF, 12%), Baltimore and Washington D.C. (1.86 million SF, 12%), Los Angeles and Inland Empire, CA (1.12 million SF, 7%), South-Central Florida (1.12 million SF, 7%) and Denver (1.07 million SF, 6%).

The portfolio's 377 tenants include Amazon, Federal Express, DHL, Coca-Cola, Fiat Chrysler and the U.S. government, according to a securities filing.

BREIT noted that the industrial vacancy rates across the portfolio’s markets has continued to decline over the past seven years and is currently just 4.6%, while rents have increased 5.7% year-over-year.

"The continued market rent growth in the portfolio’s markets resulted in rents on new leases exceeding rents on expiring leases by 9% in the portfolio during the third quarter of 2017," Blackstone said, adding that the portfolio has some leasing upside as it's currently 90% occupied.

"BREIT’s portfolio, with its emphasis on stable, income-producing warehouse and apartment assets, is well positioned to benefit from continued tailwinds in these sectors," said A.J. Agarwal, Blackstone REIT president and head of U.S. core-plus real estate for the private-equity giant.

BREIT’s portfolio now totals $7 billion over 272 properties, including 33 million square feet of industrial space and 17,200 multifamily apartments, with some select-service hotels and grocery-anchored shopping centers.

Blackstone has re-entered the U.S. industrial market in a big way since last year, when it acquired a 38-property portfolio totaling 4.4 million square feet in Southern California from Principle Real Estate Investors for about $500 million.

In January, the private-equity company agreed to buy Canada-based Pure Industrial Real Estate Trust, which owns and operates industrial properties across North America, in an all-cash deal valued at about $2 billion.

President Donald Trump's plan to impose steep tariffs on steel and aluminum imports have sparked rising concern and dire warnings this week from architects, contractors, REITs and real estate lobbying groups who say tariffs could put more pressure on already rising building costs and cause developers and investors to postpone, cancel or steer clear of new development opportunities.

Despite a carve-out by the White House for North American trading partners Canada and Mexico, the proclamations signed today by President Trump formalize 25% and 10% tariffs on imported steel and aluminum that will take effect in 15 days. The president's plan has prompted mounting opposition over the course of the week from prominent congressional Republicans and business leaders worried about the potential impact on the economy, shaken global financial markets and prompted retaliation threats by the European Union, China and other U.S. trading partners. White House chief economic advisor Gary Cohn, who opposes the tariffs, resigned this week.

Real Estate Roundtable President and CEO Jeffrey DeBoer warned that "unintended consequences from such broad penalties targeting metals essential to construction" could jeopardize the current healthy state of the U.S. commercial property industry. DeBoer said higher construction costs could make many new projects "uneconomic and unviable" and hurt investment and job creation.

Construction firms and general contractors committed to fixed-price contracts may have to absorb the added costs, forcing them to cut back on investments in new equipment and personnel, AGC chief executive Stephen Sandherr said in a statement today issued in response to the proclamations.

Higher steel and aluminum costs could force infrastructure funding cutbacks by federal, state and local officials, while the ensuring trade war will dampen enthusiasm for both private-sector investment in roads, bridges and other infrastructure undermining one of Trump's key initiatives, Sandherr said.

"The bottom line is that any short-term gains for the domestic steel and aluminum industries will likely be offset by the lower demand that will come for their products as our economy suffers the impacts of these new tariffs and the trade war they encourage," Sandherr said.

U.S. Chamber President and CEO Thomas J. Donohue also issued a statement Wednesday saying the business organization "is very concerned about the increasing prospects of a trade war which would put at risk the economic momentum achieved through the administration’s tax and regulatory reforms."

"We urge the administration to take this risk seriously and specifically to refrain from imposing new worldwide tariffs," which would harm American manufacturers, provoke widespread retaliation from U.S. trading partners and leave the true problem of Chinese steel and aluminum overcapacity virtually untouched," Donohue said.

"How much, it's hard to say, but if there are aluminum tariffs, that's got to affect the prices," Alexander said, adding that Weingarten has already locked in the price of steel through most of its active pipeline. "When it comes to green-lighting new developments, I don't think we're going to do a lot of that, because there's so much uncertainty and not robust enough tenant demand to absorb. Everyone thinks there will be some amount of cost increases from materials and labor."

Multifamily developer Camden Property Trust (NYSE:CPT) has been able to acquire development deals at prices ranging from 7% to 15% below replacement cost depending upon the market, Camden Chairman and CEO Richard Campo told analysts. At one Broward County, FL, proposed development, for example, construction costs have increased 65% since 2013, "that doesn't include another $300,000 or $400,000 of steel after the steel tariff kicks in and the rents have gone up 26%," Campo said.

Joseph Margolis, chairman and CEO of Extra Space Storage Inc. (NYSE: EXR) told analysts that the self-storage REIT's development pipeline has slowed or shut down as yields compress, in part due to rising construction costs.

"Clearly there's pressure from the equity capital providers and the debt capital providers as development yields start to get squeezed," Margolis said. "Land costs are up, lumber had a big increase over the last couple of months, labor costs are up. Now, we're thinking steel costs may go up as well."

Asked by an analyst whether the appetite for banks to lend for new development is slowing, Public Storage CEO Ronald Havner voiced similar sentiments. The attractiveness of REITs buying so-called C/O (certificate of occupancy) deals -- newly built self-storage properties constructed by developers -- has dulled from a year to 18 months ago, Havner said.

"My expectation is that would have some impact on new development going forward," he said. "Labor is tight, labor costs are rising, [the price of] steel's gone up recently. The implicit replacement cost on everyone's properties is moving up because new construction is rising in cost."

Steel Prices on Rise as Foreign Suppliers Pull Back
Four of the Federal Reserve's 12 districts saw a marked increase in steel prices, due in part to a decline in foreign competition. Price growth for lumber and other building materials picked up due to an uptick in construction activity, according to the Fed's latest Beige Book survey released Wednesday. A combination of stronger demand, supply constraints and higher materials prices increased non-labor costs, especially in construction, manufacturing and transportation.

"[U.S.] steel producers reported raising selling prices because of a decline in market share for foreign steel and expectations about potential outcomes of pending trade cases," the Fed said. "Manufacturers further down the supply chain reported sizeable increases in the price of steel that they purchased."

Ken Simonson, chief economist of the Associated General Contractors (AGC), said the tariffs could be "damaging to the construction industry in multiple ways."

"Steel is nearly ubiquitous in construction," Simonson said. "Aluminum is used in all types of buildings for window frames and curtain walls, siding and other architectural elements. The price of both imported and domestic metals is likely to rise immediately. That will reduce or eliminate any profit for contractors who have already signed a fixed-price contract for a project, but who have not yet bought metal products."

The increases in materials will cause bidder to hike prices for future projects, causing governments and other public owners of property, who generally on fixed budgets, to reduce the number or scope of projects put out to bid such as schools, highways, bridges or other infrastructure. Some private projects will be shelved or canceled as construction cost increases make them uneconomic, Simonson said.

Simonson said price increase notices continue to hit contractors' inboxes, noting that he saw an announcement from the American Buildings Co. South division of Nucor Buildings Group of a 7% price increase on pre-engineered metal buildings effective March 20.

According to an estimate this week by Trade Partnership Worldwide, an international trade and economic consulting firm, while the plan would increase U.S. iron and steel, aluminum and other non-ferrous metals employment by about 33,450 jobs, the tariffs would eliminate 179,334 jobs throughout the rest of the economy for a net loss of nearly 146,000 jobs, including more than 28,000 construction positions.

The tariffs "threatens to drastically increase the prices of many building materials specified by architects," said Carl Elefante, president of the American Institute of Architects (AIA).

"Structural metal beams, window frames, mechanical systems and exterior cladding are largely derived from these important metals," Elefante said. “Inflating the cost of materials will limit the range of options they can use while adhering to budgetary constraints for a building." Elefante added that the administration’s proposed $1.7 trillion infrastructure program will not achieve the same value if critical materials become more expensive," and the potential for a trade war puts other building materials and products at risk.

"Any move that increases building costs will jeopardize domestic design and the construction industry, which is responsible for billions in U.S. gross domestic product, economic growth and job creation," Elefante said.www.omegare.com

Thursday, March 8, 2018

by Gary Puleo writer The Reporter News
Not to be outclassed by the explosion of eye-catching development all around it, a King of Prussia office building built in the late ’70s will get a robust makeover in the near future.

Brandywine Realty Trust has a revitalization in mind for 500 N. Gulph Rd. that will transform it into “a thriving hub designed for corporate collaboration and innovation.”

Enhancements to the existing building, which is one of 18 owned or managed by the Radnor-based company, will include a loft-style space, energy-efficient modern design and finishes, suite-style restrooms, open exterior balconies overlooking Valley Forge National Historical Park and a sleek, updated exterior.

“The re-imagination of 500 N. Gulph Rd. is the first of its kind in Brandywine’s King of Prussia portfolio,” said Jerry Sweeney, president and CEO of Brandywine Realty Trust. “The new design will offer a modernized office layout and common amenity areas, creating a collaborative work environment and strategically aligning with today’s desirable workplace trends.”

Brandywine Realty Trust has entrusted ZGF Architects with reinventing the function and the aesthetics of the building, which is expected to be completed this fall, with the building’s new single-deck parking structure expected to be finished next winter.

Tenants will also have access to the adjacent Brandywine fitness, dining and conference facilities at Freedom Business Center, as well as several outdoor collaborative spaces.

“As we continue to invest in our suburban properties, we do so with a forward-thinking approach to the modern workplace,” Sweeney noted. “We understand that the workplace must act as a catalyst for engagement, innovation and collaboration, and we are proud to deliver a re-imagined product at 500 N. Gulph Rd. that will meet and exceed these needs for future tenants.”

The building is within walking distance of shopping, dining, fitness, health care and other amenities at the still growing Village at Valley Forge and King of Prussia Town Center, and is a short drive away from King of Prussia Mall.

It is also centrally located within a key corridor of the region, centrally at the intersection of routes I-76, 202 and 422. “The growth in this region is remarkable, and we’re thrilled to have companies like Brandywine investing in thoughtful redevelopment of existing infrastructure,” noted Eric Goldstein, executive director of the King of Prussia District (KOP-BID).

“With the possibility of SEPTA’s King of Prussia Rail on the horizon, King of Prussia is now widely recognized as a key hub of business and commerce, and Brandywine is building for a growing workforce of the future.”www.omegare.com

The value of new multifamily development starts jumped nearly 40% while nonresidential construction turned flat or declined in January as U.S. construction entered 2018 in a state of "decelerating expansion," according to recent data from Dodge Data & Analytics.

Total U.S. construction starts declined a modest 2% to a seasonally adjusted $725.9 billion in January following a 13% increase the prior month, largely due to an 18% pullback in public works, electric utility and gas plant construction.

The value of multifamily housing starts spiked 39% in January, with 11 projects valued at $100 million or more breaking ground as apartment and condominium construction showed fresh legs after three straight months of declines to close 2017. As a group, the commercial construction categories excluding multifamily - office, industrial, retail and hospitality projects - fell 15% in January. The value of new office construction starts declined 31% after a sharp 44% increase in December. Hotel construction dropped 13% in January after a modest 4% gain in December.

"January’s level of activity is consistent with the picture of a decelerating expansion," said Robert Murray, chief economist for Dodge Data & Analytics. "Some dampening may come from higher material prices and tight labor markets, yet while interest rates are rising, the increases are expected to stay moderate this year."

The supply wave has not crested in the U.S. multifamily sector, with CoStar’s forecast calling for delivery of approximately 500,000 units over the next two years, with much of the new development concentrated in large urban projects near CBD office buildings and retail. While office construction starts closed out 2017 below their historical average for the 10th consecutive year, office deliveries are expected to reach a cyclical high this year, with CoStar forecasting that the new supply will cause the U.S. office vacancy rate to begin ticking up as completed construction finally begins to outpace demand.

Over 225 million square feet of industrial properties delivered in 2017, the highest recorded in over 10 years, and of January 2018, over 230 million square of industrial space had broken ground in the last year, much of speculative development. The level of retail construction remained well below historical average, with just over 60 million square feet under construction as of December compared with last cycle’s peak of nearly 170 million square feet.

Despite slowing conditions in almost all sectors besides multifamily, optimism abounds in the construction and design industries. The "optimism quotient" in Wells Fargo's 2017 Construction Industry Forecast released this week was 133, a 10-point increase over last year and the highest reading for the index since the late 1990s.

Total nonresidential construction, including commercial, institutional and public works projects, remained flat, edging up 1% in January to $240.8 billion despite a 149% jump in entertainment-related projects, including the groundbreaking for the $1.3 billion domed stadium in Las Vegas that will be the new home for the Oakland Raiders, slated for occupancy prior to the 2020 NFL season.

Murray noted economic growth from this year's tax cuts may benefit commercial building and manufacturing construction starts, while the institutional portion of nonresidential building should stay close to last year’s historically elevated levels.

Construction of educational facilities, the largest nonresidential building category by dollar amount, slipped 1% while health-care facilities retreated 10% in January, despite the start of several large hospital projects such as the $254 million Hubbard Center for Children Medical Center in Omaha NE; and the $120 million replacement for the Memorial Hospital complex in York, PA.www.omegare.com

Veritiv, a full-service distribution company, as renewed its lease for three years in the industrial building at 221 S 10th St. in Lemoyne, PA. The tenant occupies 311,707 square feet there.

The distribution warehouse totals 885,802 square feet in the Lemoyne Industrial Park. It was developed in 1993 and is currently owned by GIC Real Estate International and Global Logistic Properties Ltd.

Ollies Bargain Outlet has signed a lease for 31,303 square feet in the retail building at 12-54 Cornwell Dr. in Bridgeton, NJ.

The 110,728-square-foot Upper Deerfield Plaza shopping center was developed in 1977 and is currently owned by Phillips Edison & Company. Other tenants include Dollar Tree, Tractor Supply Company and Aldi.www.omegare.com

Monday, March 5, 2018

The CEO of Prologis Inc. says even the company known as "Amazon's landlord" has plenty of disrupters to deal with in an ever-shifting demand climate for commercial real estate.

But Hamid Moghadam, along with other panelists at a recent conference in San Diego, pointed to multiple growth opportunities for investors and developers willing to make the necessary adjustments. Moghadam is chairman of San Francisco-based Prologis, among the world's largest owners of industrial properties - approximately $80 billion in assets spanning 700 million square feet in 19 countries, with about 3.5 percent of that space occupied by its biggest tenant, Amazon Inc.

Moghadam told attendees how his company has recently 'gone vertical' in developing several highly-amenitized warehouses and other logistics facilities in land-constrained markets like Tokyo and Seattle.

"You have trucks going up like in parking garages - six or seven stories in the air," said Moghadam, describing some of Prologis' recently completed warehouse projects at a March 1 conference presented by University of San Diego's Burnham-Moores Center for Real Estate.

"But that's our future," he told the crowd of more than 600 at Hilton San Diego Bayfront Hotel. "I don't know if it's going to happen in the next 10 years, but it will eventually have to happen."

The continued growth of e-commerce was cited by panelists as a major shaper of supply-and-demand for both industrial and retail space for the coming decades.

There is opportunity for growth even in mature markets like Japan, where Moghadam said companies are investing significantly in consolidating operations housed in outdated facilities into larger and more efficient ones.

Also, as consumers globally demand quick delivery of goods, facilities will need to be built closer to urban centers, and developers like Prologis must adjust planning for those logistics centers to address limitations including land constraints, and in the case of Japan, seismic and soil conditions among other factors.

"I have not seen the consumer become any more patient over the last 10 years," Moghadam said of the e-commerce delivery influence on warehouse location and planning decisions, adding, "Think of industrial as the old retail. You count rooftops and you count dollars in the pockets of the people in those rooftops."

Evolving technologies like autonomous-driving trucks, he said, could help industrial tenants address neighborhood concerns by running trucks at off-peak times and otherwise routing vehicles in a way that maximizes efficiencies within fixed transportation infrastructures that are often already stretched to capacity.

Thanks to the size of its portfolio and customer base, Moghadam said there will be opportunities to serve customers and build tenant loyalty by collecting and sharing data on energy and space usage, on-site vehicle movement and other factors to help tenants operate more efficiently.

In the meantime, Prologis is in the early planning stages for a financial assistance program that will aid community workforce development agencies nationwide in finding and training people to fill crucial warehouse jobs that many companies are having difficulty filling.

Moghadam and other experts pointed to labor shortages being a key challenge going forward, and in the industrial sector companies are seeing a shortage of workers able to pass drug tests, due in part to problems like the nation's opioid epidemic.

Local developers are seeing technology and environmental trends impact the planning of major projects. Yehudi Gaffen, CEO of Gafcon Inc., said the recent discovery of an earthquake fault on the property resulted in significant but beneficial changes to an upcoming $1.3 billion, mixed-use redevelopment of the downtown San Diego waterfront, slated to include hotels, retail, offices, beaches, an aquarium and observation tower.

The fault area will likely now remain greenspace rather than buildings. He said the 70-acre, multi-phase project could evolve even further - with changes to parking space configurations and passenger drop-off points, among others - due to rapid acceptance of ride-sharing services and advances in self-driving vehicles that are reducing the number of drivers and cars on the road.

For instance, the recent trend toward open, collaborative office spaces may not fly as the latest population segment, the 20-and-under Generation Z, becomes more established in the workforce. That segment has learned to collaborate remotely, and primarily online, via Google Docs and various other web and software programs.

"Office space as currently designed may have to change because there's something that Gen Z wants when they get into the office, and that's a door," Roschelle said, adding further changes to the national office stock may be necessitated by the continued rise of freelancing in the overall economy. More than 57 million people in the U.S., including 47 percent of the 34-and-under Millennials, are freelancing in some way.

The good news, Roschelle said, is that recent slow growth in the U.S. economy has prevented overbuilding and kept all of the major property categories from becoming overheated, meaning developers have the opportunity to address those emerging demands in new projects.

"The slow growth in the U.S. economy has been one of the best things to happen to real estate," he said.

Markets considered most attractive, based on PwC's recent national surveys of investors and other commercial real estate professionals, are those that are attracting young people or have low taxes and other living expenses. Roschelle's list includes Austin, Nashville, Salt Lake City, Fort Lauderdale and Denver.

Those and most other markets still have other disrupters to contend with in coming years.

He said advances in virtual reality, for instance, with other conferencing technologies could reduce the need for office space required for in-person meetings.

Miller also said three-dimensional printers, being used to automate production of certain industrial parts and prototypes, could potentially reduce the need for some manufacturing and logistical facilities; though Prologis' Moghadam said the plastics, inks and other materials used in 3-D printing will likely come with their own needs for storage and distribution.www.omegare.com

Friday, March 2, 2018

NorthPoint Development has broken ground on its speculative 890,000-square-foot industrial building located in Frackville, PA.

The 890,000-square-foot distribution warehouse will rise at the corner of Schuylkill Road and Route 61, south of I-81 in the Schuylkill County Industrial submarket of Philadelphia. The property is located in an Abatement Zone.

About Me

Joe O’Donnell has been in commercial real estate for over 15 years. His expertise is the corporate tenant/buyer representation as well as landlord for office, industrial and retail buildings. He primarily works the surrounding Montgomery, Chester and Bucks County markets.